The Amateur Financier

These past few weeks, these Mixed Bag Monday posts have taken a decidedly negative tone.  From foreclosures and bankruptcies to lost wallets to the downgrading of all United States debt, you would be forgiven if, simply from reading my Monday posts, you came to the conclusion that I was an incurable pessimist, always focusing on the negative side of life.  (Although to be fair, given some of the news coverage these past few weeks, particularly in regards to that aforementioned debt downgrade, I’ve been the bluebird of happiness compared to many major news sources.)

Well, to break up the stream of bad news, this week we’re taking a look at the opposite side of the coin: what to do when things are going well for you.  While it’s certainly important to know what to do when there is trouble afoot, it’s also important to know what you should be doing when everything is going well for you.  That way, when things go wrong, you’ll be that much more prepared for any trouble that arises.

Q: What Should I Do If I Win the Lottery or a Big Gambling Prize?

A: Well, I should probably remind everyone that winning big when gambling is rare and shouldn’t be counted on; but hey, if you are successful, that’s great!  First, try to keep your victory quiet; many people, from con artists to your relatives, will want a piece of your now very large pie.  Second, get a good financial team; you’ll need to have a decent lawyer, financial planner, and accountant, if you don’t have them already (or they aren’t used to working with a sizable fortune).  Finally, watch your spending; even millions can disappear quickly if you spend wildly.

Q: How Can I Retire Early?

A: Early retirement is definitely a good goal to have.  The basic steps to achieve it go something like this: Save a lot of your income.  (Typically, 20% rather than 10% is recommended to shave off some years, but even more speeds up the process.)  Invest reasonably aggressively, at least when first starting, but not so much to put your money at real risk.  Look into side jobs (like, say, blogging) to earn more, save more and invest more.  Lather, rinse, repeat, and before long, you’ll be the youngest person lounging on the beach in the middle of the week.

It'll be more impressive if you go during the summer, though.

Q: What Should I Do With the Extra Money I Earn Each Month?

A: Good on you for earning more than you spend in the first place!  There are a few basic goals you should shoot for: saving for retirement (regular retirement age first, then for an early retirement when your other goals are met), paying down your debt (especially that high interest debt), and building an emergency fund in case something bad happens.  You’ll hear many different thoughts about what order to meet each of these goals (here are mine), but if you manage to achieve all three, you’ll be doing much better than most of the population.

Q: When I Get a Raise, How Should I Adjust My Budget?

A: It’s always good when the numbers on your check increase (even if it doesn’t increase as much as we’d like).  Assuming that you weren’t struggling financially before the raise, there’s really no reason to increase what you are spending each month; more money doesn’t have to mean more spending.  Consider putting most of the raise towards your retirement, possibly cutting a few years (or at least a few months) off the time before you have enough to retire.  You can use the rest to add a bit more ‘mad money’ to your life and have some fun before retirement.

There you have it, a few suggestions in cause you have a bad case of good luck.  Hopefully, these are the sorts of issues you’ll have to deal with in the coming years.